Apr 12, 2008

MEC: The Law of Freedom to Prosper by Building Better Communities (Pt 1)

Theocapitalism Law #4. The Law of Freedom to Prosper Through Unaccountable Corporations: I believe in one, holy, catholic, and apostolic economy, and in the communion of unaccountable corporations.

Jesus’ Law #4: The Law of Freedom to Prosper by Building Better Communities.

Jesus offers alternative path to freedom – not through unaccountable corporations (the gangs of the rich) linked together to become wealthy using the labor of the poor, but rather through the rich and poor joining their labor for the building of a better world by the building of better communities.

The twentieth century was, in many ways, a battle between two economic systems. My friend Rene Padilla offers an interesting analysis of the two systems from a Latin American perspective. Communism, he says, specialized in distribution but failed at production. As a result, it ended up doing a great job of distributing poverty evenly. Capitalism, he says, was excellent at production but weak at distribution. As a result, it ended up rewarding the wealthy with obscene amounts of wealth while the poor suffered in horrible degradation and indignity. Latin America is still waiting for a viable alternative; as is the whole planet.

The twenty-first century began in the aftermath of the defeat of Marxism. The story of the coming century will likely be the story of whether a sustainable from of capitalism can be saved from theocapitalism, or whether unrestrained theocapitalism will result in such gross inequity between rich and poor that violence and counterviolence will bring civilization to a standstill, or perhaps worse. (219-220)

I fault McLaren’s characterization (ala Padilla). The battle has not been between two economic systems. The battle was between two imperial powers: One by a league of communist nations with the USS at the lead and the other by a league of capitalist nations, led largely by the US. Imperialism is the effort to politically and economically subordinate foreign peoples. Imperialism predates Marxism and capitalism by millennia. It has been an all too frequent practice by people who achieve considerable power relative to their peers. Capitalism is a highly productive economic system that creates great wealth. Therefore, capitalism creates significant opportunities for imperialism by its adherents but imperialism is not inherent to a market or capitalist economy.

Market economies, in theory, have participants who engage in non-coerced economic exchange. Everyone’s property rights are respected, from the poor to the rich, and there is rule of law that protects these rights. Nowhere has this existed with perfection (nor can it until the New Creation) but we can speak of significantly varying degrees of approximation.

Most of Latin America has operated under the latifundia or hacienda system. Hacienda’s begin in Latin America when very large land grants were made to Spanish nobles beginning in the early sixteenth century. These were virtual feudal estates. The patron ruled over peasants and serfs on his estate with help of a handful of assistants. It was a hierarchical patronage system the prevented any significant economic exchange at a horizontal level between the masses. While there was some evolution and variation over time, this structure has been the predominate ethos throughout much of Latin America well into the twentieth century. There was no rule of law or property rights in the sense that developed in the Western capitalist nations.

Today easily 80% or more of the economy in poor Latin American nations (as with much of the rest of the impoverished world) operates outside of formal economic structures. Getting a license to run an official business can take months and cost many weeks or months of pay. The poor hold no formal title to their land. Ownership is tenuously secured by neighbors knowing who has a claim to what. Ownership claims can be abrogated on whim by authorities or other powerful people. Therefore, despite occupying land, the poor have no way to leverage the land to finance other ventures. They’re disinclined to make substantial improvements to the land. They have no title and there are uncertain prospects about enforceability even if the did. This dilemma of murky ownership, shared by much of the poor all around the world, keeps upwards of ten trillion dollars of potential capital owned by the poor (globally) hidden and unemployed according to Hernando De Soto in The Mystery of Capital.

When USA corporations (and few other non-USA corporations) interacted with Latin American nations, either through ignorance or (often) by design, they have found themselves partnering in the vested interest of the latest incarnation of the hacienda patrons. Capital investment and economic exchange was with the 10-20% of the economy in the formal sector controlled by a small wealthy oligarchy. With the end of World War II, geopolitical considerations were added to the matrix of dysfunction. The USA used its military strength to not only protect investments of US corporations (ex. United Fruit Company), who were thoroughly in cooperation with the oligarchies, but to prop up these oligarchies as a defense against communism. Horrendous injustices were frequently a result.

What I have just described is not capitalism! It is imperialism by a capitalist nation. It is the suppression of free market exchange and the rule of law. What the poor have needed is market exchange, property rights, and the rule of law. McLaren writes:

Whatever the merits of trickle-down economics, Jesus offers a different plan. For him, both poor and the rich need saving; one needs liberation from addictive wealth and the other, liberation from oppressive poverty. Part of the work of the kingdom of God is to turn them from their ideologies of exploitation and victimization to a vision of collaboration in the kingdom of God – a kind of kingdom co-liberation. (221)

The economic answer here is not “trickle-down” economics but rather “peculate-up” economics. Ten trillion dollars of hidden capital needs to be brought into play by bringing the poor into the formal economy. The poor need to have rule of law that protects their rights. Most of these Latin American nations, until very recently, have never had a chance to experience anything that remotely resembles free market capitalism. (That is changing.) Capitalism has not been tried and found wanting; it was not tried!

Finally, read this statement again:

The story of the coming century will likely be the story of whether a sustainable from of capitalism can be saved from theocapitalism, or whether unrestrained theocapitalism will result in such gross inequity between rich and poor that violence and counterviolence will bring civilization to a standstill, or perhaps worse. (220)

Theocapitalism is the reality. “A sustainable form of capitalism” (read “no growth”), or just a non-theocapitalism form of capitalism, doesn’t exist. As I wrote earlier, in the context of Everything Must Change, theocapitalism and capitalism is functionally the same thing.

A big point of confusion in this book is that there is no definition of what non-theocapitalist capitalism is (if it is indeed even possible.) “Theocapitalism” and “capitalism” seem to function as catch-alls for everything we don’t like about the present order rather than a term descriptive of a specific economic system.

I frankly find McLaren's work frightening. My only hope comes from the fact that scholars in major universities and think tanks who actually work on these issues and try to solve the real on the ground issues raised by global economics won't be reading it.
(Sorry if that's too snarky, I am venting a bit I guess.)

I love the generations stuff. I think you are raising important questions.

Ron and Peter

Resisting snarkiness is my ever present battle reviewing this book and I fear I'm not always succeeding. I’m highlighting the points I find most troubling but my most common emotions oscillate between exasperation (particularly with the caricatures) and confusion. Apart from his neo-Malthusian and “save the environment” convictions I can’t get a clear read on what he envisions as the world we should strive for (other than the most abstract virtues.) I just know that the present is probably the greatest dystopia the world has ever known. :)

I think he would have done well to have a variety of folks who've wrestled with these issues a little more offer some critique. It might have clarified the issues better in the book so we could better grasp what his salient points are.

I think you may want to put this in a large, bold font. This is the part that many people don't understand.

On the other hand, I think DeSoto doesn't understand how hard it is to implement the principles he promotes. Just snapping one's fingers, or passing a law, doesn't do it. It takes a cultural (and moral) reform in a country. This is the area that McLaren could and should be speaking to. This cultural transformation is happening around the world with the church often at the cutting edge. Unfortunately, it seems Brian trapped in a 1960's "narrative." Also, it seems that too many organizations are implementing what they think are free market reforms and wondering why they are not seeing the fruit they expect.

Actually I think De Soto does tend to highlight how monumentally difficult this is. He points out that (at least at the time he wrote the book) the way property rights and the legal system evolved in the US, happened so serendipitously that it is hard to piece together a history of how we got to where we are, much less advise others. Our understanding is so integral to how we think we find it hard to see how unique our perspective is. There are serious cross-cultural hurdles that have to be overcome. I think you are about the role the church can play.